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The incentives of compensation consultants and CEO pay

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  • Cadman, Brian
  • Carter, Mary Ellen
  • Hillegeist, Stephen

Abstract

We examine whether compensation consultants' potential cross-selling incentives explain more lucrative CEO pay packages using 755 firms from the S&P 1500 for 2006. Critics allege that these incentives lead consultants to bias their advice to secure greater revenues from their clients [Waxman, H., 2007. Executive pay: conflicts of interest among compensation consultants. United States House of Representatives Committee on Oversight and Government Reform Majority Staff, December]. Among firms that retain consultants, we are unable to find widespread evidence of higher levels of pay or lower pay-performance sensitivities for clients of consultants with potentially greater conflicts of interest. Overall, we do not find evidence suggesting that potential conflicts of interest between the firm and its consultant are a primary driver of excessive CEO pay.

Suggested Citation

  • Cadman, Brian & Carter, Mary Ellen & Hillegeist, Stephen, 2010. "The incentives of compensation consultants and CEO pay," Journal of Accounting and Economics, Elsevier, vol. 49(3), pages 263-280, April.
  • Handle: RePEc:eee:jaecon:v:49:y:2010:i:3:p:263-280
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    References listed on IDEAS

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    8. Core, John E. & Holthausen, Robert W. & Larcker, David F., 1999. "Corporate governance, chief executive officer compensation, and firm performance," Journal of Financial Economics, Elsevier, vol. 51(3), pages 371-406, March.
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    Citations

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    Cited by:

    1. Kabir, Rezaul & Minhat, Marizah, 2014. "Compensation consultants and CEO pay," Research in International Business and Finance, Elsevier, vol. 32(C), pages 172-189.
    2. repec:eee:jocaae:v:13:y:2017:i:3:p:282-303 is not listed on IDEAS
    3. Geiler, P.H.M., 2012. "Essays on executive remuneration contracting : Managerial power, corporate payout, and gender discrimination," Other publications TiSEM 3c536b0d-bce3-4d1a-9f6f-3, Tilburg University, School of Economics and Management.
    4. Francis, Bill & Hasan, Iftekhar & Mani, Sureshbabu & Ye, Pengfei, 2016. "Relative peer quality and firm performance," Journal of Financial Economics, Elsevier, vol. 122(1), pages 196-219.
    5. repec:spt:apfiba:v:8:y:2018:i:2:f:8_2_2 is not listed on IDEAS
    6. Voulgaris, Georgios & Stathopoulos, Konstantinos & Walker, Martin, 2014. "IFRS and the Use of Accounting-Based Performance Measures in Executive Pay," The International Journal of Accounting, Elsevier, vol. 49(4), pages 479-514.
    7. Chen, Shenglan & Lin, Bingxuan & Lu, Rui & Ma, Hui, 2016. "Pay for accounting performance and R&D investment: Evidence from China," International Review of Economics & Finance, Elsevier, vol. 44(C), pages 142-153.
    8. Bizjak, John & Lemmon, Michael & Nguyen, Thanh, 2011. "Are all CEOs above average? An empirical analysis of compensation peer groups and pay design," Journal of Financial Economics, Elsevier, vol. 100(3), pages 538-555, June.
    9. repec:eee:aosoci:v:66:y:2018:i:c:p:1-13 is not listed on IDEAS
    10. Engesaeth, E.J.P., 2011. "Managerial compensation contracting," Other publications TiSEM 5eb8d152-e701-4e5c-8852-7, Tilburg University, School of Economics and Management.
    11. repec:eee:jocaae:v:10:y:2014:i:1:p:59-75 is not listed on IDEAS
    12. Xavier Gabaix & Augustin Landier & Julien Sauvagnat, 2014. "CEO Pay and Firm Size: An Update After the Crisis," Economic Journal, Royal Economic Society, vol. 124(574), pages 40-59, February.
    13. Geiler, Philipp & Renneboog, Luc, 2015. "Are female top managers really paid less?," Journal of Corporate Finance, Elsevier, vol. 35(C), pages 345-369.
    14. repec:bla:abacus:v:52:y:2016:i:4:p:685-771 is not listed on IDEAS
    15. repec:spr:reaccs:v:22:y:2017:i:3:d:10.1007_s11142-017-9404-4 is not listed on IDEAS
    16. Susanna Gallani, 2015. "Through the Grapevine: Network Effects on the Design of Executive Compensation Contracts," Harvard Business School Working Papers 16-019, Harvard Business School, revised Dec 2016.
    17. Armstrong, Christopher S. & Ittner, Christopher D. & Larcker, David F., 2010. "Corporate Governance, Compensation Consultants, and CEO Pay Levels," Research Papers 2068, Stanford University, Graduate School of Business.
    18. repec:spt:apfiba:v::y:2018:i::f:8_2_2 is not listed on IDEAS

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